Pegatron is also opening up new factory space and is recruiting workers in China in an effort to meet orders to manufacture the iPhone 6.
Reuters

Amid rumors that Apple’s (NASDAQ:AAPL) iPhone 6, the company’s next-generation smartphone model, could include new features such as a bigger screen and new sensors, a report said on Monday that the company’s equipment supplier, Pegatron (TPE:4938), is likely to begin production of the upcoming iPhone in the second quarter of this year at its new Kunshan plant, on the outskirts of Shanghai.

According to a report from China’s Commercial Times, Pegatron is also opening up new factory space and is recruiting workers in China in an effort to meet orders to manufacture the iPhone 6. However, the report does not specify a timeline for the release of the new flagship handset or provide details about how many units Pegatron would manufacture. In addition to Pegatron, Hon Hai Precision Industry Co., also known as Foxconn (TPE:2354), would also manufacture the iPhone 6, the Commercial Times report said.

In 2013, Apple reportedly shifted iPhone 5c production to Pegatron in order to better manage risks in its supply chain -- a move that was expected to allow Apple to expand its supply lines and reduce supply risk, MacRumors reported.

Meanwhile, Brian Marshall, an analyst with ISI Group, said in a note to investors that if Apple launches a bigger iPhone with a screen size of about 5 inches, it would drive significant upgrades among existing iPhone users, as well as convert a large number of Android users to iOS, AppleInsider reported.

According to Marshall, 14 percent of existing iPhone owners opt to upgrade to a newer handset in peak quarters. The analyst also expects a similar upgrade for the iPhone 6 in the second half of 2014.

Marshall also said that Apple could release two iPhone models to capture more market share in 2014. According to him, the company could launch one iPhone version with a 4.7-inch display, while the other model could sport a 5.5-inch screen.

And, like other analysts did last week, Marshall also rated Apple's stock as a "strong buy" with a price target of $600.